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In June 2004, the Dutch government announced that works councils legislation was to be made more flexible and issued proposals for reform, on which the social partners disagree. Changes are also to be made to the rules giving works councils influence over the appointment of members of company supervisory boards. Meanwhile, parliament is debating legislation to implement EU Directives on information and consultation and on employee involvement in the European Company Statute.
Employee involvement has been the subject of a number of legislative initiatives and proposals in 2004, relating both to the Dutch national system in this area and the implementation of European Union Directives.
Dutch legislation
Supervisory boards
Under Dutch law on company structure, the works councils of large companies have the rights of recommendation and objection in the (re)appointment of members of the supervisory board (NL9801154F). A proposal for the amendment of this rule was adopted by the Upper House of parliament on 6 July 2004. In the new regulation, the works council will lose its right of objection to the appointment of members of the supervisory board, while its right of recommendation will be strengthened (NL0204102F). The Dutch legislation in this area plays an important role in the country's forthcoming implementation of the employee involvement Directive accompanying the European Company Statute, as discussed below.
Works Councils Act
On 12 February 2003, the government issued an evaluation of the current Works Councils Act (Wet op de ondernemingsraden, WOR), which was most recently subject to major amendment in 1998 (NL9802162N and NL9709130F). The government believes that it should create the conditions to give employers and employees an opportunity to arrive at improved employee involvement. To this end, proposals were drawn up to make the legislation more flexible, to continue the current trend of decentralisation and to simplify procedures (NL0309102T). Subsequently, on 17 June 2003, the government submitted a request for a recommendation to the tripartite advisory Social and Economic Council (Sociaal Economische Raad, SER). In this request, the government asked for views on its own position, and recommendations on: the positioning of the works council in the management of companies; the publication of pay information in companies subject to the WOR, the WOR as a 'framework' act; and compliance with the statutory obligation to set up a works council in companies over a certain size. The SER issued its - apparently strongly divided - recommendation on 19 December 2003.
Nothing more was then heard on the matter for some time, until the government rather unexpectedly announced on 4 June 2004 that it wished to replace the Works Councils Act with a new Employee Involvement Act (Wet medezeggenschap werknemers). A bill on the issue was submitted to the Council of State (Raad van State) but has not yet been made public. The main aspects of the proposal are, however, known. The government mainly wants to increase the level of self-determination by giving employers and employees an opportunity to make their own arrangements about the structure of employee involvement in their own organisation. The government also wants to make it possible for the works council, subject to its own approval, to restrict the powers that are granted to it by law. Other aspects of the bill include: the following:
- in future, works council elections would be confined to one week of the year;
- trade unions and employers could, by means of a collective agreement, establish a different structure of employee involvement;
- the SER should take responsibility for the introduction of a national body to monitor and promote the quality of employee involvement; and
- the existing joint sectoral committees (bedrijfscommissies), which play a mediating role in disputes between employers and works councils, would be abolished. In their place one or more bodies with the authority to settle disputes would be appointed by the SER
Works councils and remuneration policy
On 12 December 2001, members of parliament submitted a legislative initiative on the provision of information on the remuneration of senior managers. The initiative proposed a right for works councils to information about the company’s remuneration policy, not only for the various categories of employees, but also for executive directors (NL0204102F). The idea was that this right to information could contribute to braking the increase in top salaries, a subject of recurring social debate (NL0305102F). In 2003, discussion of the initiative was suspended in anticipation of a recommendation from the SER. The SER unanimously rejected the initiative. Employer and employee representatives in the SER were strongly divided about any alternative rules.
On 29 April 2004, the Minister of Social Affairs and Employment, Aart Jan de Geus, informed the Lower House by letter that, although the government remains opposed to the aforementioned legislative initiative, it does wish to grant works councils a right to information in this area. The scope would be confined to about 3,000 larger companies and government bodies, with a workforce of at least 100 employees.
Implementation of European legislation
Information and consultation Directive
The 2002 EU information and consultation Directive (2002/14/EC) (EU0204207F) will not have a great impact in the Netherlands as the Works Councils Act (WOR) already largely covers most of the issues raised by the Directive. Nevertheless, some aspects of the WOR must be amended. A bill to this end was submitted on 9 December 2003. The most important amendment concerns the duty of confidentiality on works council members and others involved in works council activities. The bill includes a new provision whereby members of the works council and other people who may be subject to a duty of confidentiality have the right to request the relevant subdistrict court to suspend the imposed obligation on the grounds that the employer, when considering the various interests involved, should not reasonably have decided to impose a duty of confidentiality. Works councils occasionally complain that in practice some employers too readily decide to impose such an obligation. No legal remedy to oppose this exists at present, as stated in the explanatory memorandum to the bill.
European Company Statute
On 14 November 2003 a bill was submitted aimed at implementing the employee involvement Directive (2001/86/EC) linked to the European Company Statute (ECS) (EU0206202F). Earlier in 2003, the SER had issued its advice on this subject. In drawing up the bill, as much consideration as possible was taken of the existing legislation implementing the Directive (94/45/EC) on European Works Councils (EWCs) (NL9706117F).
The Dutch government has opted for a minimalist form of implementation. Wherever the ECS involvement Directive offers the possibility of a more 'generous' scheme, this has not been utilised. For example, if the EWC-like 'representative body' in a European Company wishes to call in external experts, the costs of only one person are met. The bill includes a number of provisions to ensure that the representative body is not circumvented in the event of structural changes following the incorporation of a European Company.
The Directive provides in some circumstances for board-level employee participation, and in the Dutch context the relevant provisions are those on works council involvement in the appointment of supervisory board members (see above). The Dutch legislator has not used the option provided for in the Directive whereby the fall-back 'standard rules' (which essentially apply where management and employee representatives cannot agree) on board-level employee participation do not apply to European Companies created by merger.
European Works Councils
One aspect of the European Works Councils Act (Wet op de Europese Ondernemingsraden) will be amended at the same time as the ECS employee involvement Directive is implemented. In future, special negotiating bodies and EWCs will both have the opportunity to submit a request to the Enterprise Section of the Amsterdam Court of Appeal (Ondernemingskamer van het Amsterdamse gerechtshof), in order to:
- abolish a duty of confidentiality imposed by the employer; and
- make it compulsory for the employer to supply certain information when a previous refusal to do so is apparently unreasonable.
On 1 April 2004, this same Enterprise Section issued its first ruling in a dispute over the European Works Councils Act. The case related to the termination of an existing EWC agreement after Equant, a subsidiary of France Télécom, merged with Global One. The court found that the termination was not unlawful.
Commentary
After a number of years in which little changed, a more tumultuous period lies ahead for Dutch legislation in the area of employee involvement. The government is aiming for more flexible legislation in this field. Despite criticism, the government is determined to introduce the possibility of employers and employees agreeing on a reduction in the level of involvement.
Now that the Upper House has adopted the new company structure law on 6 July 2004, it remains to be seen how soon the Minister of Justice will actually introduce this legislation, as he has in the past expressed his reservations about it. In the light of European developments, however, complete abolition of the works council's rights in relation to the appointment of supervisory board members would be curious. After all, besides the German variant of board-level participation (whereby workers' representatives appoint a number of the members of the supervisory body), the European Company Statute employee involvement Directive also refers to the Dutch variant (the right of recommendation).
The proposal to grant the works council a right to information over remuneration policy probably has little more than symbolic value. The question remains whether this right to information will have a decelerating effect on the rise in top salaries. Increasing transparency towards shareholders on remuneration issues appears to have had the opposite effect.
The implementation of EU employee involvement legislation appears to be on schedule. What is noteworthy is that the legislation on the provision of information in particular provides for more guarantees for employee representatives. (Robbert van het Kaar, HSI)